Africa: Trade Talks Spin

Editor's Note

The collapse of world trade talks in Geneva in late July was
accompanied by U.S. accusations that large developing countries
India, China, and Brazil had sabotaged the talks with their failure
to compromise. Others countered that it was the United States and
Europe that refused to meet the fundamental demands of developing
countries. Some commentators portrayed Africa as the passive victim
of the failure to conclude this supposed "development" round. But
leading trade analyst Martin Khor, of the Third World Network, says
in fact it was African countries' refusal to be victimized that
blocked an agreement biased towards the interests of the rich
countries.

This AfricaFocus Bulletin contains two articles from Khor
summarizing his analysis of the last stage of the trade
negotiations.

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Africans played pivotal role at turning point of WTO talks

Geneva, 4 Aug (Martin Khor) -- As the dust settles over the failed
WTO talks in Geneva of the last fortnight, a fact that has been
under-highlighted has become more clear. That is the important and
even crucial role that the African and other smaller economies
played in the mini-Ministerial process.

Much of the media publicity has focused on the role of the United
States and European Union on one hand, and on India, China and
Brazil on the other hand. And that is because these were the key
players within the group of 7 WTO members that undertook the
intense inner negotiations for most of the nine Geneva days (21-29
July).

However, on the two key issues on which the talks took an important
turn, the African Group and the other groupings of developing
countries -- the G33, ACP, LDCs and SVEs (small vulnerable
economies) -- played a significant and even pivotal role.

One of these was the special safeguard mechanism. The inability of
the G7 to settle on this issue was the immediate cause of the
breakdown of the talks. The other issue was cotton, over which no
discussion was held because it was an item lower down the agenda
than the SSM. There is widespread belief that it was to avoid this
issue that the US took such a tough and rather inexplicably
stubborn position on the SSM.

On both these issues, the majority of developing countries took a
strong position, and Africa was in the centre of them.

Some developed countries, particularly the US, were trying to
portray that India was the only country standing in the way of an
overall deal because of its unreasonable position on SSM. Later,
China was also lumped together with India, as wanting to use the
SSM to block market access to their agricultural markets.

The mainstream media played up this portrayal by the US, adding to
the external pressures on India and China. The two countries
however also answered back, through the colourful briefings and
lobby statements of Indian Commerce Minister Mr. Kamal Nath and the
Chinese Ambassador and officials at the Trade Negotiations
Committee.

There was also the leadership provided on the SSM issue by the G33
and its coordinator, the Indonesian Trade Minister Mari Pangestu.

The turning point came, however, when the African Group, together
with the coordinators of the ACP, LDC and SVE groups, took the
decisive step to come together with the G33 (whose leading members
include Indonesia, China and India) for a grand alliance to support
an effective SSM.

The coordinators of the groupings held a meeting on Sunday 27 July
afternoon to discuss their positions and decided to issue a joint
statement placing their views on why they found the SSM portion of
the 25 July draft of Pascal Lamy, the WTO Director General,
inadequate and not acceptable, and placing their own positions on
various aspects of the SSM, including the trigger, the remedy
especially with regard to the raising of tariffs above the pre-Doha
rates, and the need to include FTA imports in the use of the SSM.

When Kamal Nath entered the WTO building on 27 July night for a
Green Room meeting, he announced to the waiting media that a
hundred developing countries were behind having an effective SSM,
and not just India. A hunt began among the journalists to find the
joint developing-country statement, which became the "breaking
news" of that night.

From then on, it was not possible for the US or other countries to
characterise the SSM battle in the G7 as just "an Indian problem."
With this solid backing of so many developing countries and their
groupings, India was able in the G7, and Indonesia and others in
the Green Room and the TNC, to stick to their position, that an
effective and easy-to-use SSM is a legitimate demand.

On the cotton issue, the African Group continued to take the lead
to back the core group in the cotton initiative, the Cotton 4 led
by Burkina Faso, to demand that there be deeper cuts in domestic
subsidies of cotton and in a faster schedule than in any general
formula or programme agreed on for agriculture as a whole.

Kenya's deputy prime minister Mr Uhuru Kenyatta, near the start of
the Geneva talks, said at a press conference that "millions of poor
people in Africa are dependent on cotton production but the huge
subsidies in developed countries have continued to depress world
prices, thereby driving farmers out of production with no other
sources of income. We therefore look forward to an effective and
long term solution on cotton."

With the cotton issue set aside while other issues claimed the
agenda, the many Africa Ministers who came to Geneva were getting
increasingly frustrated. At the end, the talks broke over the SSM
issue, and cotton was never even discussed.

The African countries, led on this issue by the Burkina Faso Trade
Minister, Mr. Mamadou Sanou, were furious with the turn of events.
"We have been patient but we now feel betrayed, cotton was never
even discussed," he told the formal Trade Negotiations Committee
meeting on 30 July, after the talks had collapsed.

And at an African Group press conference on the same day, Sanou
expressed great disappointment and distress that the cotton issue
had been relegated to the sidelines to be discussed at the last
moment, and that moment never even came.

"Now after 10 days we have not discussed the issue we were invited
here to discuss. The invitation (from Lamy) said it wanted me to
come to negotiate on cotton. You will agree it is very
discouraging. The impact is very grave on our cotton farmers.
Because of the subsidies to US and EU cotton growers, our farmers
are in a very negative position, suffering severe deficits, there
is a risk the whole system will collapse in our countries. The
cotton system is threatened with extinction in the short term. We
are faced with imminent threat and we cannot control our anger when
we see the situation in our countries.

"We are disappointed the big countries that ask us to liberalise
our trade and economy, that those same countries are afraid to
trade with us on a level playing field, on a fair basis."

The African Group press conference, at which the Minister spoke,
was held on 30 July, in the morning after the talks had collapsed,
and just before the TNC meeting.

The Deputy Prime Minister of Kenya, Mr. Uhuru Kenyatta, who
coordinated the African Group throughout the meetings, started the
conference by reading a statement of the group.

"We came to Geneva with an open mind, to engage constructively,"
said the statement. "During the two weeks of our stay in Geneva, we
have exercised considerable flexibilities. We accepted the
leadership of the G7, hoping that the consultative process would
result in moving the process forward.

"As the G7 process progressed, we patiently waited for a positive
outcome... However, as you have witnessed yesterday the G7
consultative process did not achieve progress. Taking into
consideration the two week we have been here in Geneva, leaving
many important national issues in our capitals unattended, we are
deeply disappointed with the stalling of negotiations.

"It should be known that most of the key issues of interest to the
African continent were not even discussed, especially the issue of
cotton...

"Considering that this was a Development Round, we wish to state
categorically that we African Ministers came here with a lot of
optimism and are disappointed with the lack of progress during the
last few days that has resulted in this situation. As stated in
this room last week, leadership comes with responsibility. It is
rather unfortunate that this does not seem to have been the case.

"We call upon the membership to consider resumption as soon as is
feasible and continue with the negotiations. Africa critically
needs to realise development and get itself out of poverty through
the establishment of fair trade rather than aid. Africa's
opportunity to achieve fair trade has therefore been gravely
undermined by the lack of progress in the negotiations."

Lesotho's Commerce Minister Popane Lebesa, coordinator of the LDCs,
said it was indeed a pity the negotiations did not go beyond the
G7. The SSM issue was not resolved. Other issues not even discussed
- duty free quota free status for LDC products, preference erosion,
cotton and others.

A key part of the food crisis, distortions caused by subsidies,
will remain to haunt us, he said. He added that Aid for Trade
should continue to be pursued. The enhanced integrated framework
(EIF) is lagging behind and should be quickly launched. "We waited
too long. It appears a mere pie in the sky."

To a question how soon will the talks resume, given elections in
some countries, Kenyatta said "as much as we urge a resumption of
talks as soon as possible, we recognise there are events like
elections in many countries in the next months which will take
priority.

"Though we would like to see a mini Ministerial in the next months,
that might be difficult to achieve. But we need to remain focused.
This Round should not be derailed by internal politics. We are
talking of a fair-trade system that recognises Africa requires the
development aspect to be a full participant in global trade.

"The effects of the failure on our cotton farmers will be bad. We
discussed reduction of overall trade distorting domestic support
(OTDS) here. The OTDS makes cotton farming unproductive in Africa.
Were we able to ensure cuts in the OTDS so that market prices
reflect real costs it would have impacted positively on African
cotton farmers. But we did not get a deal on OTDS. The poor carry
the heaviest burden (on that)."

Lesotho's Minister Lebesa said that cotton was not discussed at
all. He said the US had offered to continue to discuss it with
parties concerned even with this failure. If cotton had been part
of conclusion of Doha Round, the conclusion would have been based
on multilateral rules. Now the Cotton 4 countries will have to face
the US directly rather than at the WTO.

Asked to elaborate what the US is prepared to do with the Cotton-4,
and would it be for US to reduce subsidies and would it ask for
anything from the C4, Lebesa said that on cotton it is different to
negotiate multilaterally or bilaterally. Bilateral talks may give
some benefits to the C4, but in longer term a WTO agreed rule on
how the subsidy issue on cotton would be handled is better.

The Minister of Burkina Faso, Mamdou Sanou, who chairs the Cotton-4
group, expressed great disappointment at the results of these
talks. "At the first TNC meeting (on 21 July) we expressed our
concerns. We did not want the cotton issue to be relegated to the
sidelines and be considered at the very last minute.

"We always insisted at the Green Room meetings that cotton be
considered. We were promised this... But now after 10 days we have
not discussed the issue we were invited here to discuss. The
invitation said it wanted me to come to negotiate on cotton. You
will agree it is very discouraging.

"The impact (of the failure of the talks) is very grave on our
cotton farmers. Because of the subsidies to US and EU cotton
growers, our farmers are in a very negative position, suffering
severe deficits. There is a risk the whole (cotton) system will
collapse in our countries.

"The cotton issue is very urgent as the cotton system is threatened
with extinction in the short term. This can only make worse the
depth of our disappointment. We are faced with imminent threat and
we cannot control our anger when we see the situation in our
countries. We are disappointed the big countries that ask us to
liberalise our trade and economy, and that those same countries are
afraid to trade with us on a level playing field, on a fair basis."

Asked to provide details on the US willing to negotiate with the
C4, the Lesotho Minister said: "There is no detail, just a
statement the US made in the Green Room."

A journalist commented that some countries pushing for the SSM said
they were doing this for millions for farmers in developing
countries. Do the African countries accept the arguments are in
their interests or do they see you it differently?

The Kenyan deputy premier said that the SSM is part of the
modalities and the issue is how we protect vulnerable economies and
sectors from import surges.

"We find it amazing that it is impossible to accept and understand
how a trade negotiation can collapse because of remedies that are
supposed to be activated in exceptional circumstances. It is not
central to growth of trade or to the development aspects of trade,
only a mechanisms and remedy to be used for exceptional
circumstances."

Why WTO talks collapsed

In the most widespread view, the United States did not want to
face the cotton issue to protect the wealth of a few thousand
cotton farms.

After the collapse of the World Trade Organisation's
mini-Ministerial talks in Geneva, government officials and the
Secretariat are picking up the pieces so as to save the Doha
negotiations or at least salvage some parts of it.

They are still recovering from the shock of the breakdown of the
talks that took place on July 29 after a roller-coaster nine
days.

Many delegates expressed regret at the failure. Malaysia's
representative to the WTO Ambassador Muhamad Noor Yacob said he
was disappointed because it meant an opportunity lost for
reducing the developed countries' agricultural subsidies, and
also because Malaysia would have had more export opportunities if
the tariffs were reduced.

Although some 40 ministers were invited to the talks, most of the
negotiations were conducted by only seven ministers (from the
United States, European Commission, India, Brazil, China,
Australia and Japan) plus WTO Director General Pascal Lamy.

Progress had been made on a number of issues, but on several of
the key issues the talks had been stuck. A compromise draft by
Lamy to the G7 had a fragile status, with India and China not
agreeing to important parts of it.

Meanwhile, frustration was building up among the 30 or more
non-G7 Ministers who were specially invited by Lamy to the WTO,
only to find themselves waiting for days on the wayside, while
the G7 met.

When the end came, the United States and others pinpointed
Special Safeguard Mechanism (SSM) as the sticking point of the
entire negotiations. Most developing countries wanted this
mechanism to protect their farmers from sudden surges of
agricultural imports.

The SSM would allow them to raise tariffs above the bound rate if
import prices of agricultural products fall below or the volume
rises above certain levels.

The US Trade Representative Susan Schwab tried to take the high
ground by proclaiming that it was preserving the past 30 years'
gains of the trading system from the protectionists led by India
and China whom it accused of wanting to raise their tariffs.

It was part of a concerted attempt by the US to shift the blame
of any collapse onto India and China, by portraying them as
selfishly seeking new protectionist devices. In fact a strong SSM
had the support of about a hundred developing countries.

Insiders at the G7 meeting were surprised at the tenacity of
Schwab in insisting on an unreasonably high trigger of 150% (of
the base import volume) before the SSM could be allowed to raise
duties above the bound levels prevailing now.

Lamy tried to break the SSM deadlock by proposing a new draft,
but this was rejected by the United States. On Tuesday morning,
officials of the G7 laboured to produce an alternative SSM model,
which they presented to their ministers. Schwab again rejected
the new draft, and this sank the talks.

Many ministers and diplomats are speculating that the SSM was not
the real issue that was irreconcilable. In the most widespread
view, the United States really did not want to face the cotton
issue, which was next on the agenda once SSM was settled.

Since the United States had agreed to cut its overall trade
distorting farm subsidies by 70%, it would have to reduce cotton
subsidies by more than that as it had been agreed that cotton
subsidies be cut more deeply than the average rate.

The 2008 US Farm Bill having planned that cotton subsidies be
maintained or increased in the next five years, it would have
been difficult or impossible for Schwab to offer a plus 70%
cotton subsidy cut.

Without a good cut in subsidies, US cotton would continue to be
sold at artificially cheap prices, thus depressing the trade and
income of poor African cotton growers.

The failure of the WTO talks would then have been placed squarely
on the United States, and it would have been seen as a villain
protecting the wealth of a few thousand cotton farms while
millions of African cotton farmers would continue to languish in
poverty.

This suspicion that the United States wanted to avoid the cotton
embarrassment is the backdrop to the comments made by several
ministers of developing countries in their press conferences that
SSM could not have been the real cause of the talks breaking
down, but rather the scapegoat picked on by a major player to
shift the blame on to another issue and on other countries.

After all, despite Schwab's portrayal of the protectionist
potential of the SSM, the United States itself is a frequent user
of safeguards. It was a case of the pot calling the kettle (or
rather the potential future kettle, since the SSM does not even
exist yet) black.

As Indonesian Trade Minister Mari Pangestu, who led the fight for
the SSM, put it: "It is like accusing us of a crime that we did
not commit."

As the dust settles, the diplomats and secretariat officials
remaining in Geneva are pondering over the next steps.

What will happen when the WTO comes back from its August break?
No one can tell. The speculation is that some meetings will
continue. But the spirit is gone from the talks, because the
United States will be preoccupied with its Presidential
elections.

The expectation is that nothing can happen until the new US
President and the new Congress settle in next year. By then there
may also be a change in government and trade minister in other
countries as well.

It could be difficult for the WTO talks to re-start on the same
basis as before, and they could just fade away. But the WTO and
its on-off talks have been resilient in the past. Who knows, the
off button may switch to "on" again one day.

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